Local unemployment rate drops as New Mexico sees record-breaking oil production year

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FARMINGTON — Hilcorp’s four-story office building — worth $7 million — is up for sale or lease in Farmington.

The 114,535 square-foot office building was open to the public during an open house on March 1. The building represents one in a series of properties selling or potentially changing hands recently as some companies move on and others enter the area.

Some in the region's oil industry are seeing signs of hope that business, at last, may start picking up due to new technology and new players in the region's established extraction industry.

The Four Corners region continues an economic transition in the wake of global trends in the oil and gas industry, traditionally the region’s primary economic driver. Though some major employers have left the region, remaining companies are starting to see an increase in business in the industry as oil prices are on the incline.

Realtor Dan Newman of CBRE, Inc. said several companies have checked out the Hilcorp space, but he could not disclose any information about potential buyers or leasers until a deal is closed.

Hiring again, using new tech

Farmington’s Process Equipment and Services Co., or PESCO, is hiring pipefitters, welders and code welders, according to PESCO Human Resources Manager Nashota Yazzie. The manufacturing and service operations company has as many as 20 positions to fill, Yazzie said.

“Oh yeah, we get a lot of phone calls” regarding the open positions, Yazzie said on March 7.

Production has picked up at PESCO with an increase in activity not just in San Juan Basin, but throughout the western United States, PESCO Business Development Manager John Byrom said.

“What we’re seeing is strong demand and growth for this equipment from oil drilling basically across the west — from the Eagle Ford shale south of San Antonio, up through the Permian Basin in Texas and southeast New Mexico, to up in northern Colorado and North Dakota,” Byrom said on March 8. “It’s definitely a regional phenomenon, and it’s a result of the new technology being applied — horizontal drilling and fracking into these shale formations. The growth has just been incredible, so the product that we manufacture is highly sought-after by these oil and gas companies that are drilling these wells."

Oil growth booms in the Permian

The growth has been significant — even record-breaking — over the past year, according to the New Mexico Oil and Gas Association. An increase in activity primarily in the Permian Basin has maintained the state’s “position as the third-largest oil-producing state” in the nation, according to a March 12 press release regarding 2017 oil production.

“New Mexico smashed previous annual marks to set a record for oil production in 2017,” the press release states, citing reports from the U.S. Energy Information Administration. “Driven by the burgeoning Permian Basin … New Mexico oil producers pumped a record 172 million barrels of oil during 2017, topping the previous record of 147 million barrels set in 2015, and doubling New Mexico’s oil output since 2011.”

While oil production is picking up regionally, activity is gaining momentum in the San Juan Basin as well, likely due, in part, to the many changes in asset ownership that the San Juan Basin has seen over the past few years.

New regional players making plans

Hilcorp, a Houston-based oil and natural gas exploration company, “has been busy evaluating and implementing projects to increase production” in the San Juan Basin, Hilcorp spokesman Silver Vasquez said in an email. Hilcorp began operating in the basin in 2017 after acquiring assets from ConocoPhillips in July.

The company is also in the process of closing on assets from XTO Energy, Inc. after a December sale. 

“With more than one million net acres and tens of thousands of wells, Hilcorp has identified several exciting opportunities to begin increasing natural gas production in the San Juan Basin,” Vasquez said in the March 10 email. “While we think the Mancos has the potential for future energy production, we are focused on improving the existing assets and infrastructure in the near term.”

Hilcorp is currently operating eight workover rigs in the region and plans on drilling a couple of new wells this year, Vasquez said.

Another company — LOGOS Resources II, LLC., which was established in Farmington in 2011— is working on developing its newly acquired assets. The company bought Energen Corp. assets in July 2016 and WPX Energy, Inc. assets in December 2017.

“We are drilling in our southern properties, and we’re trying to decide whether or not we’re going to drill in the new stuff that we just bought this year or if it’s going to be something that we do next year,” LOGOS President Jay Paul McWilliams said on March 7.

McWilliams said the market anticipates “relative stability” over the coming year, a prediction that might quell some economic anxiety in Farmington.

“I don’t know if slightly optimistic is the right wording, but kind of,” McWilliams said about the general attitude in the Four Corners oil and gas industry. “I think people are much more positive than they have been over the past few years. In general, it appears like we’ve gone through the worst of it and that things are I guess moving upward.”

Workforce numbers drop; so does jobless rate

The numbers are showing an impact in the local economy. Data from the New Mexico Department of Workforce Solutions shows that though the Four Corners’ workforce is shrinking, the unemployment rate is dropping.

The civilian labor force lost approximately 485,000 workers over the course of 2017, but the unemployment rate dropped by 3.3 percent.

The annual unemployment rate for 2017 is 1.3 percent lower than a five-year high of 8.9 in 2016, according to state data.

Byrom, who also serves on the Four Corners Economic Development board, said he’s noticed a similar feeling about the oil and gas economy in the Four Corners.

“It does seem like there’s indications that we’ve hit bottom and are starting to come out,” Byrom said. “A lot of these companies that have come in to buy oil and gas assets here ... they seem to be laying plans for development. We’re certainly seeing a lot of layoffs in the industry — of course, the power plants aren’t helping with the issues that they have, but it seems like the oil and gas industry is starting to show signs of uptick."

Megan Petersen covers business and education for The Daily Times. Reach her at 505-564-4621 or mpetersen@daily-times.com.

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